TREASURY INSPECTOR GENERAL FOR TAX
ADMINISTRATION

Fiscal Year 2010 Statutory Review of Disclosure of
Collection Activity With Respect to Joint Returns

February 19, 2010

Reference Number:2010-30-026

This
report has cleared the Treasury Inspector General for Tax Administration disclosure
review process and information determined to be restricted from public release
has been redacted from this document.

This report presents the results of our review to determine
whether the Internal Revenue Service (IRS) is in compliance with Internal
Revenue Code (I.R.C.) Section (§) 6103(e)(8) related to the disclosure of
collection activities to joint filers.The Treasury Inspector General for Tax Administration is required under
I.R.C. § 7803(d)(1)(B) to annually evaluate the IRS’ compliance with the joint
filer provisions of the law.

Impact on the Taxpayer

I.R.C. § 6103(e)(8) gives joint filer taxpayers who are no
longer married or no longer reside in the same household the right to request
information regarding the IRS’ efforts to collect delinquent taxes on their
joint return liabilities.The IRS has
implemented procedures for responding to requests from taxpayers concerning
collection activity on their joint tax liabilities.We believe these procedures provide IRS employees
sufficient guidance for handling these requests in accordance with the law.

Synopsis

IRS procedures provide employees with sufficient
guidance for handling joint filer collection activity information
requests.However, we could not
determine whether the IRS fully complied with I.R.C. § 6103(e)(8)
requirements when responding to all written information requests from joint
filers.IRS management information
systems do not separately record or monitor joint filer requests, and there is
no legal requirement for the IRS to do so.Further, we do not recommend the creation of a separate tracking
system.Accordingly, we made no recommendations
in this report.

Response

Although we made no recommendations in this report, we did
provide IRS officials an opportunity to review the draft report.IRS management did not provide us with any
report comments.

Copies of this report are also being sent to
the IRS managers affected by the report results. Please contact me at (202) 622-6510 if you
have questions or Margaret E. Begg, Assistant Inspector General for Audit (Corporate
and Enforcement Operations), at (202) 622-8510.

The Taxpayer Bill of Rights 2[1]
added Internal Revenue Code (I.R.C.) Section (§) 6103(e)(8), which gives joint
filer taxpayers who are no longer married or no longer reside in the same
household the right to request information regarding the Internal Revenue
Service’s (IRS) efforts to collect delinquent taxes on their joint return
liabilities.

I.R.C. § 6103(e)(8) requires the IRS to provide, in writing,
collection activity information to joint filers if they send in a written
request.After passage of the Taxpayer
Bill of Rights 2, the IRS issued procedures which stated that if I.R.C. §
6103(e)(8) is not specifically cited in the request, the IRS can provide either
an oral or written response, based upon I.R.C. § 6103(e)(7).

The
Treasury Inspector General for Tax Administration is required to annually
evaluate the IRS’ compliance with I.R.C. § 6103(e)(8).

The IRS Restructuring and Reform Act of 1998[2] added I.R.C. § 7803(d)(1)(B), which requires
the Treasury Inspector General for Tax Administration to review and certify
annually whether the IRS is complying with the requirements of I.R.C. § 6103(e)(8).

A study by the IRS concluded there was a low
volume of joint filer requests submitted under I.R.C. § 6103(e)(8).An analysis of 6 former district offices[3] over a 6-month period in Calendar Year 2000
identified only 5 written joint filer requests.As a result of the study, management in the Small Business/Self-Employed
and Wage and Investment Divisions decided not to develop a separate tracking
system for joint filer information requests.

This review was performed in the office of the IRS
Commissioner and the National Taxpayer Advocate in Washington,
D.C.; the Small Business/Self-Employed
Division Headquarters in New Carrollton, Maryland; and the Wage and Investment
Division Headquarters in Atlanta,
Georgia, during
the period November 2009 through January 2010. We conducted this performance audit in
accordance with generally accepted government auditing standards.Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objective.We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions based on
our audit objective. Detailed
information on our audit objective, scope, and methodology is presented in
Appendix I.Major contributors to the
report are listed in Appendix II.

The
provision of the Taxpayer Bill of Rights 2 related to joint filers was enacted
out of Congressional concern about the treatment of separated or divorced
taxpayers.When introducing the Bill, Representative Nancy L. Johnson (R-Connecticut) stated:

The subcommittee learned of many instances
where divorced taxpayers who had previously signed a joint tax return during
their marriage were treated harshly when the IRS later disputed the accuracy of
their joint tax return. In many cases
the IRS tried to collect the entire amount of taxes from the wife, even though
the omitted income or erroneous deductions which caused the deficiency were
attributable solely to her former husband. All too often, the woman, being pursued for
payment of taxes due, was not aware that a tax return filed during the marriage
had been audited or that a deficiency had been imposed on the return.

To address this concern, the IRS revised its
Internal Revenue Manual to include procedures for responding to taxpayers who
file jointly and submit written requests for information on IRS collection
activity.The Internal Revenue Manual
instructs employees to disclose whether any attempts have been made to collect
the tax due from either one of the joint filers, the current collection status,
and the amount collected to date.

The Internal Revenue Manual procedures also allow
employees to provide both oral and written responses to taxpayers. IRS procedures
require employees to respond in writing only when taxpayers specifically cite I.R.C.
§ 6103(e)(8) as their authority for making written requests for collection
information on joint return liabilities.If the taxpayer’s written request does not specifically cite I.R.C. §
6103(e)(8), the IRS has directed employees to provide oral responses when
practicable based upon I.R.C. § 6103(e)(7). The IRS believes oral responses provide good
customer service to taxpayers because the taxpayers get an immediate answer.We believe these procedures provide IRS employees
sufficient guidance for handling these requests in accordance with the law.

IRS management information systems do not record or
monitor joint filer requests for information on collection activities.As such, we could not determine whether the
IRS fully complied with I.R.C. § 6103(e)(8) requirements when responding to
written requests from joint filers because of our inability to identify any
joint filer requests received for information on collection activities.During this review, management from the Small
Business/Self-Employed and Wage and Investment Divisions commented that the
IRS’ position has not changed from last year, and the IRS does not plan to
implement a system to identify or track joint filer requests for collection
activity.In addition, there is no legal
requirement for the IRS to record or monitor cases involving these requests.

We do not recommend the creation of a separate tracking
system and are making no recommendations in this report.This is the twelfth year in which we have
reported our inability to provide an opinion on the IRS’ compliance with the
provisions of I.R.C. § 6103(e)(8).

The overall objective of this review was to determine
whether the IRS is in compliance with I.R.C. § 6103(e)(8) related to the
disclosure of collection activities to joint filers.To accomplish our objective, we:

I.Obtained confirmation from the
Small Business/Self-Employed and Wage and Investment Divisions that the IRS
neither has, nor plans to implement, a system or process to identify or track
joint filer requests for collection information relating to the requirements of
I.R.C. § 6103(e)(8).

II.Interviewed various IRS and Treasury Inspector General
for Tax Administration personnel responsible for the Taxpayer Advocate
Management Information System,[4]
the Information Tracking System,[5]
and the Performance and Results Information System[6]
to determine whether there is a system or process that tracks taxpayer
complaints relating to the requirements of I.R.C. § 6103(e)(8).

III.Obtained information on the actions taken by the IRS in
response to I.R.C. § 6103(e)(8) to determine the impact on IRS programs.

A.Reviewed
all prior Treasury Inspector General for Tax Administration audit reports for
the statutory Joint Filer Reviews to identify any corrective actions taken by
the IRS.

B.Reviewed
historical and current Internal Revenue Manual sections to identify any updates
made in response to I.R.C. § 6103(e)(8).

C.Reviewed
IRS.gov (the public IRS Internet site) and related IRS publications to identify
how the IRS informs taxpayers of their rights to collection information on
jointly filed tax returns under I.R.C. § 6103(e)(8).

Internal controls methodology

Internal controls relate to management’s plans,
methods, and procedures used to meet their mission, goals, and objectives.Internal
controls include the processes and procedures for planning, organizing,
directing, and controlling program operations.They include the systems for measuring, reporting, and monitoring
program performance.We determined the following internal controls
were relevant to our audit objective:the
Small Business/Self-Employed Division Collection function’s policies,
procedures and practices for responding
to taxpayer requests relating to the
requirements of I.R.C. § 6103(e)(8).Our assessment did not evaluate the controls for ensuring the IRS’ accuracy
in responding to these requests because IRS management information systems do
not record or monitor joint filer requests for information on collection
activities.

[3]
Locations formerly known as district offices are now called Area Offices by the
IRS.

[4] The
Taxpayer Advocate Management Information System is an electronic database and
case inventory control system used by Taxpayer Advocate Service employees.

[5] The
Information Tracking System is an application used by the IRS to control and
track information and correspondence.

[6] The
Performance and Results Information System is a management information system
that provides the Treasury Inspector General for Tax Administration with the
ability to manage complaints received and investigations initiated.